The South Korean government has introduced a new electric vehicle policy aimed at supporting domestic automakers Hyundai and Kia, while addressing the competitive threat posed by Tesla Inc.’S TSLA The Model Y and the Chinese giant WORLD Co WANT I WILL DO IT.
What happened: The new electric vehicle policy, announced on Wednesday, will provide South Korean automakers with a competitive advantage in the global electric vehicle market, Electrek reported, citing The Korea Herald. The policy is a response to price cuts on Tesla’s Model Y and BYD models, which use low-cost LFP batteries.
Hyundai Business Research Center Automotive Group Leader, Yang Jin Soo, noted that price cuts by Tesla and the rise of BYD have triggered a global price war in the electric vehicle market. The revised policy aims to help domestic automakers compete on a level playing field.
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Effect of politics: The new plan sets the maximum subsidy at about $4,800 (6.5 million won), which is $225 (300,000 won) less than the previous policy. The vehicle’s range, price and battery type determine its suitability. Battery type has become a key focus of the new policy, with significantly reduced subsidies for electric vehicles with “lower performance batteries”, such as LFP batteries from China.
The new policy sets a limit at $41,000, down from about $43,000 last year. This means that Hyundai’s IONIQ 5 could potentially earn a subsidy gap of more than $2,800 compared to the Model Y.
Because matter: The new EV policy comes at a time when Tesla’s Model Y is making waves globally, becoming the first EV to top global car sales. Last year BYD also managed to beat the American company as the best seller of BEVs.
Last year, Tesla introduced its cheaper Model Y with LFP battery, leading to a huge increase in sales in South Korea. Priced $16,000 lower than other variants, Tesla’s sales would have increased by almost 876% in September alone, capturing approximately 10% of the entire Korean electric vehicle market in four months.
Hyundai, on the other hand, is emerging as a strong contender in the electric vehicle market, with its Ioniq 5 leading the company’s sales. The new policy could potentially strengthen Hyundai’s position in the market, further challenging Tesla’s dominance.
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